A Case Of Operation Management At Lotus Cars Commerce Essay


Operation management is a part of everyday life that includes the most general tasks of routine to proper domain specific tasks. In case of companies facing certain critical bottle necks in the smooth and efficient working of an organization it is better to have some proper tools to address the same. The paper tries to examine how a company can go about improving its Operation Management.

About the Company-Lotus Cars

The company under study is Lotus Cars which is a British manufacturer of sports and racing cars. The company is based out of Norflock, England. The company is into making cars of light weight characteristics. The company has been lately seen negative growth and slump in its profits.


Strategy is define as the concentration of a company into its core competencies (by means of its future plan of action) in order to gain competitive advantage.

Strategy Types

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There are four steps of strategy that are present in context of a firm and its environment. The degree to which each will impact a company's competitiveness will vary depending (netmba, 2010)

Industrial level strategy

These are the strategies at the level of the industry like certain government related rules and regulations.

Corporate level strategy

In this case the strategy happens at the market level whereby companies look at the overall market conditions and competitive intelligence.

Business level strategy

Many organizations are mark with diversity (many businesses). These Business level strategies is concern with identification of the markets by which each of the many businesses compete with each other and the size of rivalry involved.

Functional level strategy

• A company competes in several markets and hence each function needs to develop a strategy appropriate to each of these markets. Functional strategies concern investing in and developing the necessary capabilities to bring this about. (thinkingmanagers, 2010)

Functional Level Strategies within the Context of a Firm

A company competes in a number of market and thus each task needs to develop a strategy suitable to all of these markets. Functional strategies concern invest in and rising the essential capabilities to carry this about. Functional strategy should be aimed at looking towards gaining a business stability department wise or business units wise. (1000ventures.com, 2010) As it turns out the corporate strategy is the outcome of the functional strategy. Thus the former can't be achieved without the later as it is the functional strategy that binds the various components of the corporate strategy.

Components of the strategies of a firm

Definition of Operations management

Operations Management is one of the business functions that oversee the process of planning, organizing, co-ordaniting and controlling the process that are used in the production of the goods and services. It is one of the management functions of the organization and involves the management of the people process, technology and equipment and many other resources of the organization. It is one of the core functions of every organization. (managementhelp.org, 2010)

The major role of the operations management is to convert the inputs of the organization into the goods and services as per the needs of the customer. (ocw.kfupm.edu.sa, 2010)These inputs may be in the form of resources (manpower), plant facility, the process (such as the equipment and machinery) or in the form of material (such as the information and the technology knowhow). The results of these inputs are in the form of goods and services. The below figure explains the major role that the operations management plays. (gyte.edu.tr, 2010)

Performance Information feedback

Customer feedback

Examples of various operations management functions are the movement of the passangers with their luggage from one destination to another and in hospitals with its resources in the form of doctors, nurses, wardboys, operation theater, etc for transforming a sick person into a healtier person. Thus is the the role of the operations management to manage and control all the resources of an organization. Operations management involves all the process from the design to the conception phase in the life cycle of a product or services. Thus it helps in the designing of the product, deciding on the resource that are required to accomplish that design, the routing of the raw material, the schedule production of the job, decising on the process that is to be applied to make the product, deciding on the machinery, the tols and the fixture that are to be required, deciding the layout of the plant thereby takin a decision on the facility where the product has to be made, management of the inventory of all the levels of the goods produced ( raw material;, work in pogress and the finished goods), decision on the inspections and the documentation of the good made. Thus in a way the role of operations management is to oversee and make sure that all the process of the company are adhered to while performing a task. It is the customer feedback and the performance information that are used as an input by the operation management department to continually adjust its inputs thereby thrying to change the output as per the requirements. Thus the whole of this transformation process in the operations management is a very dynamic process. It is also the role of the operation management to add value to the good and services during the transformation process. Value addition is the process of increasing the overall value of the product ( at the output stage) during the transformation process.(from the raw material to the product) Thus the greater the value that hjas been adde more if the productivity of the organization. Besides operations management also looks at improving the efficiency of an organisation. Efficiency for an organisation is to accomplish all the process well and at the most feasible cost. (scribd.com, 2010)

Framework for reflecting Operations strategy issues in corporate decisions

Corporate Objectives

Marketing Strategy

How to products qualify and win orders in the market place

Operation Strategy

Process Choice








Other financial measures

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Always on Time

Marked to Standard

Order Now

Product markets and segments




Standardization Vs customization

Level of Innovation

Leader Vs follower alternatives


Quality conformance




Demand increases

Color range

Product range


Brand image

Technical support

After-sales support

Choice of alternative processes

Trade-offs embodied in the process choice

Role of inventory in the process configuration

Make or buy





Function support

Manufacturing planning and control systems

Quality assurance and control

Manufacturing systems engineering

Clerical procedures

Compensation agreements

Work structuring

Organizational structure

The process for Operations Management

The steps to link operations to marketing with corporate strategy development are first by defining the corporate objectives. Then the links are required between objectives of business and corporate strategy.

Link provides the base for establish clear, strategic way for a industry and demonstrates all the strategic consciousness and strategic motivation necessary to business achievement.

Link defines the restrictions and symbols the parameter next to which the various inputs could be calculated and reliability established. (mitsloan.mit.edu, 2010)

The second step is to determine marketing strategies to meet these objectives and linking them closely to the agreed corporate objectives. The steps are

Market preparation and manage units should to be recognized.

Analysis of product markets

identify target markets and approving objectives for each

The third step is to review how dissimilar goods meet the criteria in their individual markets and win orders against competitors.

Order Winners and Qualifiers

Determining the Order Winners and Qualifiers for a particular market

Qualifiers are those criterion that a company must meet for a clients to even consider it as a potential supplier. Be as good as competitors.

Order Winners are those criteria that win the order.

Basic Characteristics of the Order Winners and Qualifiers

General statements about markets embody imprecise meanings. A prerequisite for sound corporate strategy development (that is, agreement by all on what markets the company is and should be in and the characteristics of those markets) is missing. Again Order winners and qualifiers are both market and time specific. Usually Companies must distinguish the level of importance for individual criteria for each market. Order winners and qualifiers and their relative weightings will change over time. In the majority instances, differences exist between the criteria needed to keep obtainable customers and those wanted to add to market share or gain potential clients. (Stevenson, 2008)

The next step is to establish the appropriate process of Operations Management to manufacture these products (process choice)

Quality as a strategic tool

The strategic significance of excellence

excellence has emerge in conditions of strategic importance because of two unified factors:-

The figures and capability of new entrants into markets.

Lee and Schniederjans (1994) state: The only necessary bat for financial dominance today and in the 21st century is product or service excellence. Very good or class quality provides an company with the only insurance that it can fight productively whether it is American, European, or Japanese.

2. The greater amount of choice that customers have

Rivalry is fierce in today's business world and product quality is becoming increasingly recognized as the first prime concern in many purchase conclusion. There are numerous well publicized cases in which intense competition has been the change agent compelling companies to adopt more advanced quality systems and total quality management to improve product quality.

Tools of Operations Management that could be used at Lotus Cars

The various tools that are effective in case of Operations management are

World Class JIT

The aim is to eliminate waste such as record so that no has to pay anything for them and give a fast, consistent and stretchy reply to customers' requirements at least cost and with minimum dependence on inventory. Now the emphasis is on working together with suppliers so that together they can find ways of enabling suppliers to satisfy your requirements for frequent small batch deliveries without the need for additional inventory.

Key Elements of JIT

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Exposing fundamental problems and then putting them right once for all, so that they don't keep recurring (in contrast of just in case)

Striving for simplicity, because simple processes are less likely to cause problems and are easier to put right when they do go wrong.

Reducing manufacturing throughput times, effectively by using cell manufacturing and set up reduction techniques.

Improving supplier performance to stop material problems interfering with your ability to satisfy your customers' requirement.

Improving quality, because short lead times and lower stocks mean that you no longer have the protection against things going wrong that you have been used to in the past.

Improving labor flexibility through cross-training, so that you can switch people between tasks to cope with the everyday ups and downs in customers' demands (Jay H. Heizer, 2001)

Cell Manufacturing

It is the process of grouping of manufacturing facilities into a production cell, in order to produce a family of parts which require a similar sequence of processes. In this way companies can cut the distance parts have to travel during the manufacturing process to an absolute minimum.

Attacking Waste

The various wastes that the company should be looking forward to reduce are

Waste from over production

Waste of waiting time

Transportation waste

Processing waste

Inventory waste

Waste of motion

Waste from production defects

Reducing Lead Times

Reducing lead time as much as 50% can be very easy. The key is to understand what is happening, what takes the time and what causes things to go wrong.

Total Quality Management (TQM)

TQM is based on the concept that all the stakeholders of an organization should work together to achieve continual improvement in the organization's culture, service, process and products

The overall objective of TQM is customer satisfaction through quality products and services. This in turn will lead to more demand for products thereby decreasing price and increase inn growth both for the company and its employees

Six basic concepts in TQM

Involvement of the management as the whole concept of TQM is based on continual improvement process which requires everybody's participation

Customer centric focus by listening to them and providing them with the products and services as per their needs.

Involvement of the employment of the company by empowering them with decision making process and assigning them with more responsibility

Increase the quality of the product and services by continual improvement of the process

A strategic supplier partnership based on mutual understanding and respect

Gauge the performance in order to analyze the results

Business Process Reengineering

It is the means of re-engineering the various process that are being followed in the company thereby increasing the efficiency of the process, reducing the cost and improving the quality of its output (goods and services) The whole concept of business re engineering is based on asking some of the basic questions-' Why are certain process in some particular way ?' Operations management is the key to follow the process of business re-engineering in an organization.

Supply chain Management

Supply chain management is the process managing the flow of the information and the material to and from the supplier of the raw material to the final customer of the product. The main objective of the supply chain is to make the overall process in the organization more efficient and full proof

Problems with Operations Management in Lotus Cars

The major problems with Operations management are two folds

Operations Executives feel they must:

Exercise skill and experience in effectively coping with the exacting and varying demands placed on operations management

Reconcile the trade -offs inherent in these demands as best they can

Rarely do they see as an integral part of their role the need to contribute appropriately to corporate decisions that will impact the demands on operations management and its ability to provide the necessary market support.

How Companies see Operations Management's Contribution

Companies also normally reinforce operations executives' emphasis on the short term operational aspects of operations management.

Companies develop managers within operations management. (C. Donald J. Waters, 1999)

At present Lotus Cars follows the process of production which is more based on the numbers of the cars to be produced (based on the demand). Its suppliers are required to supply the raw material based purely on the production forecaster. But the process is able to deliver only a certain part of the consignment of the units on time.

Recommendations for Lotus Cars

The few recommendations that the management of a company can look into when determining their Operations management strategy are


Operations management should be treated as a part of an basic hierarchical business planning structure which assures a fit between developed goal and events and those of bigger companies.


The aptitude of a company to expect new processes and technologies and to put into practice long term program to obtain capability in advance of requirements

Pattern of actions

The experiential torrent of decisions or events of a company over a age of time in 9 categories: capacity, facilities, process technology, vertical integration, production planning and control, quality systems, organization, workforce, and new product development.

Portfolio of operations management capabilities

The portfolio of developed capabilities reflects spirited strengths obsessed by the developed purpose and their relative significance. Generic manufacturing capabilities include: quality, cost , flexibility, innovativeness and delivery performance .

Program of improvement

The set of structured, time-phased, and evaluated actions which are implemented to improve the manufacturing capability of the firm.

Examples include total quality management, group technology, just-in-time, etc. Program typically involve broad worker participation

Performance measurement

The systemic means by which operation management is evaluate. Good quality performance dimension schemes are allied with strategic company goals so that performance which furthers those goals is methodically unbreakable.

The recommendation for improvements in Operations Management as per the various process involved in Lotus Cars are

The company can go in for alternative manufacturing units thereby meeting the actual demand. This will again help in the increase in the efficiency and the effectiveness of the individual units of production. The company can also look forward to keep a safety stock which should again be around 20%-50% of the demand thereby reducing its opportunity loss. But this might lead to an increased inventory holding cost. To overcome this company can go for the economic order quantity based on the lead time. Again the lower inventory levels of the plastic polymers (which have a lot of supplier) can compensate for the high cost of the other raw material involved in the production of the cars.

Supply Chain

In case of Lotus Cars the supply chain plays an important role in making its process more robust and efficient. Thus it requires proper data and information flow across the various components of the value chain. This may help Lotus Cars achieve a streamlined supply network. The major components of the supply chain in case of Lotus Cars are its production department (suppliers), the marketing/sales department (internal) and the distributors (end products). The key to effective supply chain is to form a strong linkage between these components of the value chain. In today's world it should be remembered that it is not the companies that are competing anymore by the supply chain that is competing. Thus a good supply network would enable Lotus Cars to reduce the lead time, reduce cost, and increase the delivery time and quality of the products. Lotus Cars can do away with its other activities and concentrate only on its core competency which is production of Quality cars. The other activities such as distribution and logistics should be outsourced to companies that are specialist in the field. (Krajewski, 2005). The other option in the case of the Lotus Cars is to achieve forward integration of its supply chain by collaboration or merging with its distributor.

Tables showcase the suggested area of improvement for Lotus Cars


How a company should view the process for effective operations management

Situation at Lotus Cars

Quality Management

Quality is free

It costs money to make quality

Quality is controlled

Quality is built in


Quality at the source is emphasized.

Inspection at large

Scoring, reporting and evaluating

Acceptance sampling

Statistical study of variations to understand causes

Process control


Workers are on the spot trouble shooter

Quality personal are responsible for quality problems


Planning oriented

Control oriented

Strategic quality management

Focused on broader systems, proactive to opportunities, big breakthroughs and small steps

Focused new product development, reactive to problems, big breakthroughs only.

Visually control

Control chart, poka-yoka

Only charts

Plant and equipment

How a company should view the process for effective operations management

Situation at Lotus Cars

Group Technology

Highly used

Reluctant to use


Valued as it facilitates consistent quality

Valued as it drives labor out of the product

House Keeping

5's (Seiri, Seiton, Seiso, Seketsu and Shitsuke) are used.

Comparatively untidy and disorganized work place.


Light displays to highlight trouble spot.

Not used


Prevention mentality

Preventive maintenance

Regular. M/c breakdown and tool failure must be eliminated.

Corrective mentality

Breakdown maintenance

Only after failure. M/c break down is not serious because of inventory

Production System

How a company should view the process for effective operations management

Situation at Lotus Cars

Manufacturing system

Make to order

Kanban (pull system)

Made to stock

MRP (push system)


Customized output

Standardized output

Set ups

Low set up time

High set up time




Material Handling systems

Flow: use of gravity

Less significant

Inventory System

How a company should view the process for effective operations management

` Situation at Lotus Cars

Waste reduction

Inventory is an evil. It hides problems that should be allowed to surface. Every effort must be extended to minimize inventory.

Inventory is an asset. It makes production rolling along. It protects against forecast error, machine break down, and late deliveries.


Once in motion, always in motion. Production should be just in time, No queues of WIPs

WIP are needed to be sure that machine utilization stays high.

Lot Sizes

Keep reducing the lot size. The smallest quantity is desired for both manufactured and purchased parts.

Keep revising the optimum lot size based on some formulas


How a company should view the process for effective operations management

Situation at Lotus Cars

Small lot purchasing



Supplier -buyer proximity

Frequent deliveries

Few deliveries

Supplier selection

Long term

Short term

Few committed suppliers

Single source

Multiple source

Complimentary concern

Work together to maximize the economies of co operation

Reduce supplier power, widen supply base, reduce buyer power, widen customer base

Supplier as designer

Loose specifications, emphasis on performance

Rigid specifications. Innovations are not encouraged

Product and Price

How a company should view the process for effective operations management

Situation at Lotus Cars

Product design



R &D lacking: product design depends upon what is available rather what the customer demands

Customer oriented product

Pricing Strategy

Believe in long term gains, low margins; sell high volumes at lower price to make high profit.

Strive for short term gains, sell at high price to make high profit